Poor corporate governance remains a significant challenge for businesses in Ghana, according to Mr. Felix Addo, Founder and President of the Chartered Institute of Restructuring and Insolvency Practitioners, Ghana (CIRIP-Ghana). He stated that weak governance structures, undisclosed conflicts of interest, poor internal controls, and inadequate professional oversight continue to expose businesses to financial and operational difficulties. This was made known at a stakeholder engagement on restructuring and insolvency held in Ghana.
Mr. Addo emphasized that corporate governance goes beyond the boardroom and encompasses a company's institutional framework, charter, control systems, corporate culture, and approach to managing its reputation. He expressed concern about situations where directors fail to declare conflicts of interest and take decisions that serve personal interests rather than those of the company. According to him, many instances of good corporate governance are lacking in Ghana.
The President and Founder of CIRIP Ghana identified weak internal audit and control systems as another major challenge facing businesses in Ghana. He noted that some businesses consider audits and professional consultancy services an unnecessary burden. Mr. Addo stated that many companies are not enthusiastic about conducting audits, seeing it as a pain, and stressed the importance of external professional advice in a rapidly changing commercial environment.
Beyond governance weaknesses, Mr. Addo identified external shocks, including foreign exchange volatility, drought, the COVID-19 pandemic, and disruptions to international supply routes, as factors that could push otherwise viable businesses into distress. He explained that companies heavily dependent on imported inputs are particularly vulnerable to sharp movements in the exchange rate, which could increase their costs beyond what had been budgeted.
Mr. Addo urged businesses to seek professional assistance as soon as they notice early signs of financial distress, rather than waiting until creditors and legal demands begin piling up. He stressed that when warning signs of distress appear, businesses should not wait but ask for help. Warning signs could include persistent cash-flow difficulties, delayed salary payments, and demand notes from creditors.
On restructuring, Mr. Addo said a major challenge is the lack of commencement financing for distressed companies entering administration. He explained that businesses often need fresh working capital to turn around their operations, but existing prudential rules could make it difficult for companies classified as non-performing loans to obtain further financing from banks. CIRIP-Ghana is engaging relevant stakeholders on ways to create an appropriate framework that would enable viable distressed businesses to access financing while protecting lenders.
Mr. Addo also called for stronger collaboration between restructuring professionals and the media, describing journalists as an "invaluable partner" in educating businesses and the public about insolvency, restructuring, and the importance of seeking help early. This engagement aims to promote a better understanding of the role of the media in Ghana's restructuring and insolvency journey.
Key points
- Poor corporate governance is a major cause of business failures and corporate distress in Ghana.
- Weak internal audit and control systems are a significant challenge for businesses in Ghana.
- Businesses are urged to seek professional assistance early when showing signs of financial distress.
